The image below shows a search in Google and highlights where the PPC advertising and the Natural (or Algorithmic) search results appear.  While Google is not the only search engine it is probably the one that most people use and the results of Yahoo, Ask, Bing etc. appear in much the same way.

PPC & Natural (or Algorithmic) Search Results

What is SEO?

SEO is the process of improving the volume or quality of traffic achieved through the Natural (or Algorithmic) search results.  The search engines are trying to return quality relevant content and the aim of SEO is to help make your site pages as relevant as possible for the phrases that you are targeting.  SEO normally involves keyword and competitor research in the first instance followed by input into both the site itself and also into offsite elements.

What is Pay Per Click (PPC)

To put it (very) simply PPC works by the advertiser selecting appropriate keywords that will then trigger their adverts. When a user types in the keywords the advert is displayed (there are other variables involved but this is a short article). If the user clicks on the advert then the advertiser pays, hence the phrase Pay Per Click.

What are the Benefits of PPC?

• You can use PPC to test your business ideas
• PPC can be set up immediately, SEO can be a slow burn
• PPC can inform your future SEO strategy
• It is flexible; you can turn off the campaign, reduce spend, refocus your adverts etc.

Further Resources:
http://en.wikipedia.org/wiki/Pay_per_click
http://en.wikipedia.org/wiki/Search_engine_optimization